FMC Corporation (NYSE:FMC) is one of those iconic American companies that has been around for over a century, steadily providing modest returns to its shareholders. The company was founded way back in 1883 as the Bean Spray Pump Company, and has gone through several iterations before it was named the FMC Corporation or the Food Machinery and Chemical Corporation in 1928. Before FMC settled on agricultural chemicals as its main product, the company acted as a sort of early industrial conglomerate that was involved in various other sectors including military vehicles for World War II, fire truck pumps, and even consumer recreational vehicles. Learn more
Like with most companies, FMC Corporation’s stock hit a near-term low in March of 2020 due to the COVID-19 pandemic. This was mostly due to being dragged down by the broader markets, and less to do with the company itself. In fact, revenue fell year over year from Q1 of 2020 to Q1 of 2021, as did adjusted EBITDA and adjusted earnings per share. The stock is trading right around the midpoint of its 52-week trading range, and despite being a company that is nearly 140 years old and operates on several continents around the world, the market cap of FMC sits at just less than $14 billion. How can a company like FMC perform as a long-term investment?
FMC Corporation Stock Analysis: FMC has seen its fair share of controversy over the years, as the rise of the organic and natural food industry has shone a dark light on insecticides and other agricultural chemicals. FMC has been involved in creating multiple Superfund Sites around the country including in Idaho, Minnesota, New York, and Washington State. The company has even been tied to farmers in Kenya using the FMC-made Furadan to kill African Lions. Needless to say, this is not the type of publicity shareholders like to be associated with.
In terms of growth and expansion, FMC does have business operations in Asia, Europe, and Latin America. Out of its four major markets, only its Asian sales grew year over year from 2020, with a majority of those products going to be used in rice paddy fields. Much of the losses in 2021 have been attributed to rising supply chain issues as well as increased spending on research and development.
FMC is finding ways to modernize its portfolio with the recent launch of ARC Farm Intelligence, which is a software platform that can accurately detect increase in pest pressure, before a full on outbreak happens. The 3RIVE 3D Application technology is the latest in chemical distribution to crops, with one fill of its tank covering 480 acres of land. The newest machines use 90% less water than before and carry 50% less weight, making it a more sustainable and environmentally friendly way of applying protection to crops.
Finally, FMC is reinvesting into the agricultural industry, as the world continues to find more sustainable and healthier ways to cultivate food sources. The surprisingly low market cap and share float, combined with an impressively tight price to sales ratio of 3 and forward looking price to earnings ratio of 13, means the stock actually has some room for growth. With advanced agricultural technologies and global expansion, as well as a decent dividend yield, FMC actually makes for a nice safe investment that has a potential for growth if it can execute on its continued modernization.